Cryptocurrency is a popular buzzword. It was one of the most searched terms on the Internet in 2017. But why? What is a cryptocurrency anyway?
Normally, I am not one to use dictionary definitions when writing, unless it is absolutely necessary, and, in this case, it is. The word “crypto” is Greek and means “a person having a secret allegiance to a group, party, or belief” or “secret or hidden.” And currency means money. A more common definition of cryptocurrency is a digital currency created via coding and encryption techniques known as cryptography.
The origin of cryptocurrencies go back to the late 1980s, but their use never really gained traction until now. Some say that the original cryptocurrencies were used by cyber criminals as a way to make purchases without oversight.
The gold standard of cryptocurrencies today is Bitcoin, which was created by Satoshi Nakamoto in 2013 as digital currency to be used in peer-to-peer exchanges for products, goods, and services. Unlike most currencies, cryptocurrencies are not backed or funded by any major bank, such as the Federal Reserve Commission or International Monetary Fund, thus cutting out the need for intermediaries in financial transactions.
Although Bitcoin is the most publicly known and traded digital currency, others, such as Litecoin, Ripple, Ethereum, Monero, are available. These lesser-known digital currencies are often called altcoins, or alternate coins.
So how does one “cash in” on cryptocurrencies? Well, it is a complicated process, but, basically, altcoins are bought through cryptocurrency exchanges. Coinbase is one of the most popular exchanges but there are also Bittrex, Kraken, BitFinex, Coinmama, Gemini, Bisq, Bitstamp, CEX.IO and LocalBitcoins. (source)
You can use USD, EUR, or GBP to purchase percentages of altcoins based on the market value. For instance, at the time this article was written, one Bitcoin was worth $11,000 USD. Bitcoin can be purchased by percentage, and you can buy any percentage of a Bitcoin that you want. So, if you buy $1,100 USD worth of Bitcoin, you’ve purchased 10 percent. The value of Bitcoin peaked in December of 2017 at $19,000, so early investors, who bought Bitcoin back in 2013 or 2014 and didn’t cash out, saw their investment grow from $650 to $19,000!
In late 2017, several stories about Bitcoin users and owners cashing in for hundreds of thousands, and even millions, of dollars made headlines. Just recently news broke that rapper, actor, and entrepreneur Curtis “50 Cent” Jackson made more than $7 million because, in 2014, he accepted a 700 Bitcoin as payment for his album, Animal Ambition. Though it took nearly four years for him to see this profit, his taking a chance on Bitcoin had a huge payoff.
Should HR allow Bitcoin and cryptocurrency as a form of payment or as an employee benefit option? Yes. Bitcoin has come out of the shadows and gone mainstream. Cryptocurrencies are a wave of the future, and they are exploding across the international market. Several companies are accepting Bitcoin now and many more are considering using Bitcoin in the near future, including Amazon. Employees are interested in investing money in Bitcoin and hoping its market value will increase as digital currency continues to gain popularity.
Digital currency is really no different than the stock market or Nasdaq. According to Jasmin Ye Han, in her article for the Employers Group, “Paying Workers in Bitcoins? It’s Becoming a Reality,” about 200 employers are already paying employees in altcoins. Most of these companies report that their international employees are more likely to request payment via cryptocurrency than their U.S. counterparts.
The most challenging part of offering a digital currency as payment or as benefit will be establishing which currencies you should offer, which exchange you want to use, and which benefit broker you would use to handle the processing and administrative aspects. (It would be too much to ask an HR Coordinator to handle this last part.)
As with any investment, you need to be aware of areas of concern, for instance, the consumer education piece – there is a lot of misinformation about Bitcoin and digital currency. Some employees may think that investing in Bitcoin is an automatic ticket to millions. However, in every instance of someone cashing in for big bucks, the investor had to wait a long time for the perfect storm in the rise of Bitcoin value. Yes, one Bitcoin purchased in 2014 at $650 rose to a value of $19,000 in December 2017, but since December the value of Bitcoin has started to plummet. It may rebound, or it may not as other altcoins begin to gain popularity.
If you are thinking about paying your employees in digital currency or offering digital currency to them as a benefit, be sure to perform due diligence evaluating which currency exchange is best for your company and the region in which you operate, the fees associated with those exchanges, and the available market for digital currency.
What do you think? Do you think using digital currency is a good idea? Tell us in the comments below.
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4 Comments
One pro is that, when employees are paid in Bitcoin, they can easily exchange it into virtually any currency at any time.
The best part of all is that the digital currency market has shown continuous growth. Since employees have no need to exchange their Bitcoin for U.S. or Canadian dollars, they have the advantageous option of cashing out when exchange rates are good. Doing so may provide the employee with a nice bonus!
Bitcoin and other cryptocurrencies tend to be quite volatile in terms of their value. This volatility makes it harder to trust cryptocurrencies as a worthy HR benefit.
I’ve come back to this post a few times because I keep trying to wrap my head around offering this benefits and I’ve got to admit, I don’t think I’ll push for it as a benefit where I work. I like the idea of getting creative with benefits and benefit options, but this one seems like a huge undertaking to me and still a bit of a risk. Full disclosure though, my HR interests are more focused on recruiting than administering and fully understanding benefits.